Do You Look at IT to Reduce Cost or Drive Business Growth?
New study on "How IT Is Increasing Efficiency but Failing to Drive Business Growth..."
A study by Juniper Networks and the Economist Business Unit finds that IT is succeeding at improving the efficiency of business processes, but most IT departments are failing to take the next step in becoming a strategic partner for business.
We have all heard it over and over again: The CIO's role and the role of IT is in a state of flux. You've got to evolve or be left in the dust.....
It should come as no surprise—IT has moved out of the data centers and wiring closets and is now working closely with the business side to make existing processes more efficient. And IT departments are succeeding in increasing the efficiency of business. However, they are also falling short when it comes to strategic transformation—to driving business growth in new areas—according to a new survey by Juniper Networks and the Economist Intelligence Unit.
"'We found that businesses today are primarily looking at IT to save money—for organizational efficiency," says Bask Iyer, CIO of Juniper. "IT is not really looked at for growth. But the most financially successful companies are doing what other companies are not doing. They're working closely with IT to develop new products. And they say IT is supporting their business growth by helping identify new opportunities. The highest performing companies are clearly seeing the benefits. They tend to look at the CIO role and IT as a strategic partner rather than as a backroom operator.""Businesses still view the IT function in the traditional role of improving process efficiency," adds Rozina Ali, deputy editor of the Economist Intelligence Unit. "However, to really take advantage of an increasingly digitized world, companies need to recognize the potential value of IT as a collaborative partner in identifying new opportunities."
The survey, Can the IT Department Keep Up with Exponential Data Growth? was based on the responses of 474 IT and business executives from Germany, Japan, the U.K. and the U.S. The Economist Business Unit says 51 percent of the respondents were C-level executives and the remainder consisted of senior executives and managers.
IT Time Filled by Incremental Improvements, Slowing Evolution
"The reality is that many companies are forced to do more with less, and IT has been pressed to drive these efficiencies by making incremental improvements—data center consolidation, server elimination, disk management, offshoring, etc.," Iyer says.
"In most cases," Iyer says," tasks to make an organization more efficient have filled the dance card of entire IT departments. This focus on operational efficiency has slowed IT's evolution to a more strategic business partner."
"In the networking space, we see the challenges identified in this research most pronounced," he adds. "Network managers often find themselves competing with more tangible, easily understood business applications for strategic budgets and senior-level attention. Networks have a hard time rising to the top of the list of strategic priorities. This is ironic, as the networks have become enablers (or sometimes inhibitors) for those new applications and business models that are more easily understood."
The majority of respondents, 52 percent, say IT's primary responsibility is to improve business process efficiency (32 percent say IT's primary responsibility is fixing hardware and software issues and 25 percent say it's improving security to mitigate potential IT-related threats). Also, overall, 42 percent of respondents agree that IT's main strength is the efficient execution of general business processes.
IT Plays Strong Role in Financial Performance at High-Performing Companies
But among the highest-performing companies, which Juniper and the Economist Business Unit define as those companies who report their financial performance is stronger than their peers, IT is seen in a different light.
Compared with their peers, 20 percent more of high-performing companies say technology plays a very strong role in their organization's financial performance; 11 percent more say they strongly agree that the IT function can support business growth by identifying new market opportunities; and eight percent more say the IT function is very closely involved in helping develop new products.
"The highest-performing companies are also more likely to measure IT's performance in the context of business function," Iyer says. "They actually demand more from IT and they get it. The business should be demanding this. CEOs and executive boards should demand that they have a leader and a function that is strategically positioned and ready to contribute to growth."
"This is one of the few functions whose value is going to increase every few years, similar to Moore's Law," Iyer adds. "Figure out what you want, demand it and go out and recruit it. There are people out there who can do the job for you. Don't use the excuse that your IT guy doesn't have the skills."
Steps to Help IT Transform Into a Strategic Partner
In Iyer's view, there are several steps companies can take to facilitate better interaction between business and IT that can lead to real innovation as opposed to just business process improvement.
"Number one, as IT practitioners, we must embrace this interdependence between IT and business and step out of the support function into a more strategic role," he says. "We must also partner with the business to develop new products and identify new market opportunities. At the same time, the business needs to embrace the value of IT as a strategic partner. Finally, together, we must embark on this transformation to deliver both growth and productivity."
For instance, he says, companies can take a page from Google's playbook: At Google, when the annual planning process rolls around, it is the business unit leaders rather than the CIO that step up to defend new IT projects that will benefit their business unit. This, Iyer says, encourages IT and business stakeholders to align their priorities and the budget.
"They step up and say, 'I cannot grow in these markets if these 10 IT projects are not executed,'" Iyer says. "Why is the CIO the only guy who is going to defend why IT should put money into the CRM system?"
Iyer says businesses should also seek to involve IT more closely in the Research and Development process at the beginning, where practitioners can help keep processes streamlined from the start rather than coming in after the fact to streamline workflow and other processes. Additionally, IT needs to embrace disruptive technologies like cloud, mobile and big data that propel business growth and create an opportunity for IT to step into a more strategic role.
"It should be a collaborative process," he says. "There's no other breakthrough in management that I know of that has as much bang for the buck as information technology."